Posts Tagged ‘minimum down payment’

Geographic Income Limits for Home Ready Program

May 1, 2017


One potentially limiting aspect of the Home Ready program is that income limits are specified by census tract.  (Notice I said “potentially.”  We will get back to that point very soon.)  To qualify for the program, the borrower’s income must be less than or equal to the income limit set for the geographic area of the subject property.  Fannie Mae specifies and publishes the geographic income limits as part of the program.  Many areas in Metro Atlanta have an annual income cap of $67,200, but there are many other areas that do not have an income limit.  Now back to the word “potentially.”  If the home you want to buy lies in a no-income-limit area, you could make a million dollars per year or even per month and still qualify for a Home Ready loan for that house.

Two key points to remember here:  First of all, the income limits are based the subject property’s location, so you can have varying income limits in different parts of the same county.  In fact, the eligibility maps go down to the street level, which means that houses on one side of a street could carry a $67,200 income limit and houses on the other side of the same street could have no income limit.  Secondly, the income limits apply only to borrowers on the loan.  If two employed people plan to live in the home, but only one of you is on the loan, then the other occupant’s income does not count toward the income limit.  Of course that means that the sole borrower must qualify for the loan using his or her income only.   

So how can you determine whether you qualify for the Home Ready program’s low down payment / low-interest rate / low mortgage insurance benefits?  You can call me at Dunwoody Mortgage!!  We will first discuss your income and the geographic area where you want to buy.  I can look up the area online and determine whether your income qualifies for Home Ready in that area.  If you meet the geographic income limits, we will complete your loan application, pull your credit report, and run your application through our Automated Underwriting System (“AUS”).  The AUS findings will then determine if you do qualify for Home Ready’s great benefits. 

Buying a house in Georgia and curious whether you can obtain a Home Ready loan?  Give me a call and we will review Home Ready and your other loan options.  Don’t think you will qualify?  We at Dunwoody Mortgage have secured loans for many customers who initially thought they would not qualify.  Don’t assume you cannot win loan approval!  Call me and let’s discuss your situation.  We might just surprise you!! 

 

 

 

3% Down and a Great Interest Rate!

April 24, 2017

National mortgage giant Fannie Mae offers the Home Ready conventional loan program that can be very helpful for qualifying home buyers.  Home Ready enables qualified buyers to obtain a mortgage with a 3% down payment, so it’s great for people with limited available cash.  In addition, when the buyer has an average credit score, Home Ready provides lower interest rates and mortgage insurance premiums relative to standard conventional loans.

One important point is that this program is NOT limited to first time home buyers.  If you have owned a home before or if you have an ownership interest in another property, you may still qualify for a new Home Ready loan, as long as you plan to occupy the new home as your primary residence. 

Home Ready requires that at least one of the home buyers complete an online home buyer education course.  This course costs $75 and takes about 4 to 6 hours to complete.  The course topics include:

  • Home affordability and budgeting
  • Credit ratings and credit improvement
  • Real estate agent selection
  • Mortgages
  • Offer letters
  • Home inspections
  • The closing process

The prospective home buyer will receive a certificate of completion after passing a final quiz and submitting a feedback survey.   Passing the quiz requires a score of 80%, and the buyer receives three attempts to pass the quiz.  If the buyer does not pass the quiz in three attempts, an additional approximately 30 minute telephone educational review session is required.   After obtaining the certificate of completion, the buyer should send a copy to his / her selected lender.

Here are a couple of additional program benefits:

  • Non-occupant borrowers are permitted.
  • Non-borrower household income from a family member (parents or siblings, for example) can be used to support a higher debt to income ratio than the borrower can obtain alone.

Future posts will cover Home Ready’s geographic income limits, and we will give an example scenario to highlight the program benefits.  But keep this in mind for now, if you want to buy a home in Georgia, but your credit score is less than great and you don’t have much available cash for a down payment, Home Ready could be the program that makes home ownership a reality for you.  Call me to discuss Home Ready and other options.  Or if you have a friend or family member who could benefit from Home Ready, forward this blog post to them.  We at Dunwoody Mortgage love to make home ownership a reality for everyone, and it’s especially fun for people who initially think they can’t qualify!

 

Down Payments Basics for Home Buyers

February 23, 2017

Blog HeaderA recent home ownership survey showed that 3 times more first time home buyers than repeat buyers say they lack enough money for a down payment.  Perhaps this is due to folks not truly understanding down payment requirements.  Many people believe you must make a 20% down payment to buy a home.  That is a myth!! 

Home buyers can purchase a home with as little as 3.5% down for a FHA loan.  Depending on your credit score and available cash, you may be better off going with a 5% down conventional mortgage.  In certain cases, you may be able to qualify (depending on your income and geographic area) for the low interest rate, low cost mortgage insurance “HomeReady” program, for as little as 3% down.  (Certain geographic areas have no income requirements.)

So what if you don’t even have 3% – 5% available for a down payment?  Are there options?  The first question for you is, “Do you have a relative who can give you the down payment?”  If you do have a loving person who will give you the down payment, we can use that with the proper documentation.  Note that the giver must be a blood relative or a spouse.  Generous ex-spouses are not considered family members so they cannot provide a gift.

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If you lack the available cash and you don’t have a giving relative, do you have a 401K or similar retirement account?  Depending on your plan’s rules, you may be able to borrow against your account to help fund your down payment.  Talk with your plan administrator for the details.

If these options are not available to you, you may need to wait and save.  But the time needed to save 3% to 5% is much better than saving for the 20% many people think is required.  Note that you must have 20% to avoid mortgage insurance, but if you can handle the mortgage insurance included in your monthly payment, you can buy a home with much less than 20% down.

Do you need coaching on the best loan / down payment option for you?  That’s what I do!  Call me at Dunwoody Mortgage.  Together we will evaluate your situation, review your options, thus allowing you to make the best decision for you and your family.

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Educating First Time Home Buyers

February 2, 2017

A recently published survey of 2016 home buyers shows that first time buyers (“FTBs) comprised a larger percentage (35%) of all home buyers than in 2015 (32%).  FTBs face greater challenges than buyers who have previously purchased homes.  In addition to the uncertainty and stress in making such a major financial decision for the first time, FTBs face additional financial challenges, some real and some more perceived.  For example:

  • 2.7 times more FTBs than repeat buyers believe they must improve their credit scores before buying a home.   
  • 2.9 times more FTBs than repeat buyers expect a home purchase delay due to their current lease terms.   
  • 3 times more FTBs than repeat buyers say they lack enough money for a down payment.

In short, first time buyers need significant education, advice and support.  In future blog posts, we will address each of the above challenges in more detail.  For now, let’s take a quick look at some ways Dunwoody Mortgage Services (“DMS”) helps to educate home buyers.

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The DMS staff has created a series of home buyer education videos published on our website:  http://dunwoodymortgage.net/custompage-view.aspx?id=9.  These videos are concise and to the point, each covering a key mortgage process topic, such as cash to close, monthly payments, mortgage insurance, and more. 

We encourage our clients to plan early – last year I closed a loan for I client with whom I had been talking for 2 years.  My boss’ record is 7 years.  In short, we will take the time to listen, to coach, and to help our clients plan for a future home purchase.  And sometimes, it may take a few years to save enough money, to improve credit scores, or to meet tax return guidelines for self-employment.  Helping our clients plan for mortgage success is something the DMS staff enjoys doing.  

Also, we coach our clients to plan a home purchase that best fits their financial situation.  Oftentimes, a home buyer can qualify for a mortgage payment that is so high, they would have to change their lifestyle to live with the payment.  Such high payments can lead to significant financial stress – we call that being “house poor.”  We consult with our clients about how a mortgage payment will fit into their budget and lifestyle.  We encourage discipline and budgeting, with the goal of helping the client buy a home that they love, and that they can comfortably afford.

Know a first time home buyer who needs financial coaching and counsel?  Tell them about us here at Dunwoody Mortgage — we will invest a lot of time in them, so their first home investment will be successful, and with minimal stress. 

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Jumbo Loan FAQs

June 7, 2016

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Now that we’ve talked about having the best of both worlds when it comes to Jumbo rates, let’s discuss some other questions people have about Jumbo loans.

Q: What is a Jumbo loan?
A: Any loan amount over $417,000.

Q: How large can Jumbo loans get?
A: There really isn’t a limit, but our office focuses on loan amounts up to $2,000,000.

Q: How much money do I need for a down payment?
A: You can apply for a Jumbo loan with as little as 10% down. The rate is higher, so ideally you’d want to make at least a 20% down payment.

Q: Are the closing costs higher for Jumbo loans?
A: The short answer is yes. The longer answer is this… while Jumbo loans, VA loans, FHA loans, and Conventional loans have some of the same fees associated with the loan program, some of these fees are based on the loan amount such as title insurance, discount points, and in the state of Georgia, the transfer taxes. For example, one transfer tax is 0.001% of the purchase price. That means on a Jumbo purchase of $1,000,000, the fee is $1,000. If it is a conventional loan purchase of $400,000, then the fee is $400. If an FHA purchase of $225,000, then the fee is $225. So while the fees are essentially the same name, some are just much higher than others due to the purchase price/loan amount differences.

Q: Are Jumbo loans harder to qualify for if you are self-employed?
A: No, they are not. The same basic documentation is needed for the loan application. The main parts of underwriting are to ensure the income is stable for all borrowers. This is just looked at more closely for self-employed borrowers, but not any different than applying for a conventional loan.

Q: Are reserves needed for Jumbo loans?
A: Yes.

Q: Ok then, how much reserves are needed?
A: It depends on the loan program. Some require 6 months on the subject property. Others require 12 months. Some even require 6 months on all properties owned. The key is asking your Loan Officer the specifics of the reserve requirements up front so there are no surprises later in the loan process.

Q: Can the reserves be from retirement or other non-liquid accounts?
A: Yes, retirement and other asset accounts can be used. That said, some Jumbo loan programs limit the amount of reserves that can be used from those accounts. Again, ask your Loan Officer for these details.

Looking to buy a home that will require a Jumbo loan? Buying in the state of Georgia? If yes, I can help you get started. Contact me today and we’ll discuss these questions and more.

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Home Buying Preparations – Down Payment

January 19, 2016

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Wrapping up a blog post series to help you keep the new year’s resolution to purchase a new home in 2016. In the first post, we talked about how important it is to know “how” you are paid (in addition to “how much”). Next, we dispelled the rumor that a low credit score means a bad interest rate. That isn’t necessarily true. Today, we’ll finish up with the down payment.

I have written countless posts about how much of a down payment is needed to buy a home. Can you guess how much? If you’ve read this blog in the past, you know that the answer isn’t 20% down. Just like the credit score requirements differs depending on the loan program, so does the down payment requirements. In order to buy a home, you’ll need:

  • 5% down for a conventional loan (3% is also possible if a borrower qualifies)
  • 3.5% for an FHA loan
  • No down payment on a VA loan

When making less than a 20% down payment, there will be PMI (Private Mortgage Insurance) on the loan unless it is a VA loan. There are some differences in mortgage insurance between conventional and FHA loans. Here are some quick notes on them.

  • FHA loans have an up front mortgage insurance premium. The monthly PMI is required regardless of the down payment (even if you put 20% or more down). If making the minimum down payment, FHA mortgage insurance is permanent. The monthly amount is set on a factor of 0.85% of the loan amount regardless of the amount down or the borrower’s credit score. For more information on FHA mortgage insurance, check out this previous post from the Mortgage Blog.
  • Conventional loan mortgage insurance is determined by the amount of the down payment and the credit score. Conventional loans have a sliding scale on the factor determining the monthly PMI. The more down AND the higher the credit score, the lower the factor goes (and vice versa). The mortgage insurance isn’t permanent, and there is no up front premium. For more information on conventional loan mortgage insurance, check out this video post.
  • Conventional loans also have a Lender Paid Mortgage Insurance (LPMI) program. Using this loan, a borrower agrees to a higher interest rate in exchange for no monthly mortgage insurance payment. For more details on this program, read this post from 2015.

If you take nothing else away from this post, please remember that regardless of what you hear on the news OR read on the web, you do not need 20% down to buy a home. I promise! If you are looking to buy a home in the state of Georgia, I can prequalify you today for a home purchase without needing 20% down.

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How to keep your loan approved – Assets

August 11, 2015

blog-author-clayjeffreys3

Continuing a series on how to keep your loan approved by avoiding things that can cause a delay in closing OR EVEN causing the loan to be denied.

Last time, we looked at three things to avoid when it pertains to qualifying income. Today, we’ll set our eyes on the assets needed for the loan approval.

When it comes to assets, we mainly focus on documenting all of the money coming in and out of a borrower’s accounts. As a mortgage loan originator, I must show that no one standing to benefit from the sale of the home gave the borrower/home buyer money to purchase the home. I also must show that any gift contributions given to our borrower/home buyer is from an acceptable gift source. Here we go!

  • Avoid making random and undocumented deposits in bank accounts: If you receive a check for $1,000 from a tax refund OR reimbursement from health insurance, make a copy of the check prior to the deposit. Then let me know so there is no confusion in underwriting. This way we avoid any potential delays in closing.
  • Document gift money correctly: When receiving gift money for a loan, I must document the transfer of funds with a gift letter, proof of funds given, and proof of funds received by my client. I also need to show the giver is an acceptable source for the loan program. FHA has looser requirements, but Conventional loans typically require the giver to be family to the borrower OR have a documented/established relationship. Without documenting the money correctly OR coming from an acceptable gift source, the closing could be delayed or even have the loan denied.
  • Don’t transfer large sums of money between bank accounts: Assuming the transfers are done between your own bank accounts, then at worst, this could cause a delay in closing as  we will need to go back to underwriting with your new provided bank statements showing it was your money. Why do you have to do this? Again, I have to show the money didn’t come from anyone standing to benefit from the sale of the home. If the money isn’t from your own accounts, then we have to go back to the second item listed here and document a gift.

Looking to buy a home, but planning on getting a gift from a family member? Expecting a quarterly bonus to show up, and you need that for the down payment? Worried these things may be difficult in the loan process? Don’t worry. I do this all the time. If you are buying in the state of Georgia, contact me today. I’ll instruct you on how to properly document the assets, and make sure this doesn’t cause a delay to our closing date.

Remember, let’s not make a mistake as we go through the process!

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3% down loans are back (for some)

December 10, 2014

blog-author-clayjeffreys3

Fannie Mae has brought back 3% down payments for some home buyers. As of the date of this post, Fannie Mae is allowing the change starting next week, and lenders are currently updating their systems to accommodate the change. Soon home buyers can qualify for a purchase with as little as 3% down.

What is the catch for buyers? The 3% minimum down payment is limited to first time home buyers purchasing a primary residence. A first time home buyer is defined here as either:

  • a buyer who has never owned a property
  • a buyer who has not owned property in the past 3 years

Refinances are also included in the change. Current home owners can refinance with as little as 3% equity to cover closing cost rolled into the new loan (5% equity is required if closing costs are not rolled into the new loan).

Are you a first time home buyer with little down looking to buy a home? Are you looking for the smallest down payment available without having to use an FHA loan and pay ridiculously high up front and monthly mortgage insurance payments?

If the answer is yes to either of those questions, and you are buying the home in the state of Georgia, I can help you get started! Contact me today, and I’ll get you prequalified and on your way to owning your first home.

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Mortgage Mythbusting

October 21, 2014

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Continuing our educational series. Today, we’ll focus on mythbusting.

To contact any of us at Dunwoody Mortgage Services, click here!

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Why are we not having a faster housing recovery?

September 25, 2014
blog-author-paulbusino
Earlier this week, we focused on why the economy was sluggishly turning around. In that post, we touched on how the economy is directly tied to the housing market. The better question to ask could be “why are we not having a faster housing recover?”
Lending guidelines are stricter now compared to five to six years ago. I think we all agree we needed to tighten lending guidelines, but many feel we have over corrected. The biggest problem I see that exists are although Fannie Mae, Freddie Mac and FHA have one set of requirements, many lenders will not lend on those standards because of the concern of a buy back.
A buy back is when a loan is deemed not to conform to the guidelines and the lender is required to purchase  the loan back from Fannie Mae, Freddie Mac, or FHA. This tends to be more prevalent when a loan defaults.
A good example… a lender makes a loan and the loan defaults 9 months later because the buyer loses his job. The agency that owns that loan will audit to see if anything is not correct in the loan package, and I mean anything. If any small thing is found, they will require the lender to purchase the loan back. This happens even if the mistake in the loan file (such as a typo or missed signature) does not correlate to the reason for default. This has caused many lenders to put additional requirements to help mitigate the risk. This creates a tight credit environment, even more so when you add all the government regulation into the mix.
Some feel that if buyers put 20% down to buy a home, it would eliminate foreclosures. The idea is if a buyer has that much “skin in the game,” they would not stop making their mortgage payment.
This is not true. VA loans are 100% financing. It has the lowest default of any loan program available. Perhaps we should take a closer look at the requirements of the VA loan and us this as our standard.
Another area of concern is indications from the government that they want to shut down Fannie Mae and Freddie Mac. Many bills have been introduced to privatize this part of the mortgage industry. It may sound good, but if the mortgage industry privatizes expect interest rates to be roughly 2% higher than government backs the mortgages.
It remains to be seen how this will all unfold, but hopefully the overregulation will come to an end soon.
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